Although the gold market is struggling to find traction as panic and volatility grip financial markets, the world ’s largest asset management firm sees potential for the yellow metal.
In a commentary published Thursday, Russ Koesterich, portfolio manager for BlackRock’s Global Allocation Fund, said that he sees three factors supporting gold going forward.
“With both nominal and real, i.e. inflation adjusted interest rates in free fall, gold is well positioned to do what it is intended to do: “help insulate a portfolio,” he said in the report.
A weakening U.S. dollar, falling global economic growth expectations and falling bond yields will help to push gold prices higher in 2020 he said. The comments come as the gold market sees steep declines this week with prices trying to hold support around $1,600 an ounce.
April gold futures last traded at $1,579, down 6.6% from last Friday. The decline comes after gold prices started the week pushing above $1,700 for the first time in seven years.
Looking at currency markets, Koesterich said that the U.S. dollar is down about 3% from its nearly three-year peak hit last month.
“While gold can do well even when the dollar is rallying, historically its outperformance is strongest when the dollar is down,” he said.